* Fisher says effectiveness of bond purchases fading
* Fed report cautiously positive on economy
By Alister Bull and Ann Saphir
WASHINGTON/MINNEAPOLIS, Jan 16 A senior Federal
Reserve official voiced skepticism on Wednesday about the
benefits of additional asset purchases by the U.S. central bank,
while a more dovish policymaker maintained his campaign for
additional policy easing.
Dallas Federal Reserve President Richard Fisher, in remarks
that were mainly about the need to reorganize banks that were
"too big to fail," said the effectiveness of the Fed's massive
bond purchases in helping the economy was fading.
"I believe that it is increasingly having a lesser impact as
we go through time," Fisher said, when asked about the benefits
of further so-called quantitative easing.
"(Borrowing) rates are the lowest they have been in a
lifetime, but they have not come down as quickly as I would like
... to see, and I don't think, therefore, our policy has been as
effective as we would like it to be," he said.
The Dallas Fed chief is counted among the most hawkish of
the U.S. central bank's 19 policymakers in his concern about
The Fed pledged last month to keep buying $85 billion of
Treasury and mortgage-backed bonds a month until there was a
significant improvement in the outlook for the labor market, but
said it was also monitoring the program's efficacy and costs.
Minutes of that Dec. 11-12 meeting, released earlier in
January, showed that several policymakers thought the bond
purchases should be halted well before the end of this year.
The Fed has taken bold steps to boost the recovery and says
it will hold interest rates near zero until unemployment hits
6.5 percent, from the current 7.8 percent, provided inflation
does not breach a threshold of 2.5 percent.
Fed officials predict the U.S. economy will grow by between
2 percent to 3.2 percent this year, but are less optimistic on
the prospects for employment, with forecasts for fourth-quarter
unemployment ranging from 6.9 percent to 7.8 percent
Minneapolis Fed President Narayana Kocherlakota, speaking in
Minneapolis, delivered his third speech in two days on why the
Fed should hold interest rates ultra-low to ease policy further.
"Is it a panacea, will it cure all ills in the economy?
Absolutely not," Kocherlakota said. "But given the goals that
have been set for us by Congress, it's incumbent to move in the
direction that we're supposed to move, and the policy path, the
change that I've described, I think would be helpful."
'MODEST OR MODERATE' GROWTH
A Fed report released earlier on Wednesday found that
economic activity across the United States increased at either a
moderate or modest pace in recent weeks, but employment
conditions had not changed.
"Hiring plans were more cautious for firms doing business in
Europe or in the defense sector," the Fed noted in its Beige
Book report, referring to uncertainty abroad and gridlock in
Washington over fiscal policy.
That assessment, based on feedback gathered from its 12
districts and pulled together by the Philadelphia Federal
Reserve on or before Jan. 4, 2013, otherwise painted a
cautiously positive picture of an economy gathering steam.
"Reports from the twelve Federal Reserve Districts indicated
that economic activity has expanded since the previous Beige
Book report, with all twelve Districts characterizing the pace
of growth as either modest or moderate," the Fed said.
The previous report found the economy had jogged along at a
In the current Beige Book, the Fed highlighted areas of
improvement, most notably in the real estate sector and consumer
spending, although manufacturing was more mixed.